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Exelon Asks Obama for EPA Regulation as AEP Seeks Delay

Exelon Corp Chief Executive Officer John Rowe
Exelon Corp Chief Executive Officer John Rowe. Photographer: Aaron M. Sprecher/Bloomberg

Exelon Corp. Chief Executive Officer John Rowe had a message for White House Chief of Staff William Daley on power-plant pollution limits being weighed by the Environmental Protection Agency: Go for it.

Rowe, who is also chairman, and his counterparts Mayo Shattuck of Constellation Energy Group Inc. and Lew Hay of NextEra Energy Inc. made their case for government regulation in a White House meeting on March 8, eight days before the EPA proposed the first U.S. limits on air toxics such as mercury, arsenic and lead from coal- and oil-fired electricity plants.

The agency has become the flashpoint in debate over regulation by the Obama administration, with business groups and Republicans joined in seeking to block or delay its rules to curb carbon emissions and pollution from boilers. The air-toxics rule is an exception, with utilities divided on calls to stop or postpone it.

“The CEOs at that White House meeting talked about wanting an effective rule on time and about how the markets are already anticipating it,” Michael Bradley, executive director of the Clean Energy Group’s clean air policy initiative, said in an interview with Bloomberg Government.

Exelon, NextEra and Constellation, all part of Bradley’s coalition aimed at cutting pollution, emphasized the need for the EPA to stick to its 2015 compliance deadline, Bradley said.

The Concord, Massachusetts-based group, founded in 1997, told EPA Administrator Lisa Jackson in a June 15 letter that a delay would “undermine” companies already preparing and making investments based on the 2015 deadline.

American Electric

Spokesmen for Chicago-based Exelon, the biggest U.S. power producer, NextEra, owner of Florida’s largest utility, and Constellation, a Baltimore-based electricity producer, declined to comment on the White House meeting and referred questions to Bradley.

On the other side of the rift are utilities including American Electric Power Co. and MidAmerican Energy Holdings Co., a unit of Warren Buffett’s Berkshire Hathaway Inc. AEP, which produces 80 percent of its electricity from coal, says the 2015 deadline is one reason it will have to cut about 600 jobs, close five coal-fueled power plants and spend as much as $8 billion through the end of the decade.

A 2020 deadline “is realistic, 2015 is not,” AEP President Nicholas Akins said in an interview. The Columbus, Ohio-based company wants Congress to pass legislation extending the deadline by five years, and Representative Ed Whitfield, a Kentucky Republican, has said he plans to introduce legislation in August forcing a delay.

Buffett Unit

Companies that don’t rely heavily on coal for their power generation may support the rules because “they would benefit from retirements” of coal-fired plants by rivals, Akins said.

MidAmerican Energy said EPA rules including the proposed air toxics standard will cost customers at its two utilities more than $5 billion by 2023.

“MidAmerican, like many utilities, is concerned about the costs and timetables for the implementation of these EPA rules,” Cathy Woollums, chief environmental counsel for the Des Moines, Iowa-based company, told the Senate Environment and Public Works Committee this month. “These compliance costs will increase rates to our customers.”

Companies have had time to prepare, and the public can’t wait to reduce toxic air emissions that hurt children’s brain development and cause asthma, heart attacks and premature deaths, according to Carol Browner, a former EPA administrator who was Obama’s energy and climate adviser until earlier this year.

Companies Knew

“These companies have known for a very long time, I would suggest maybe as long as 10 years, that something was going to happen on mercury,” Browner said during a June 21 panel discussion in Washington.

Duke Energy Corp. Chairman and CEO Jim Rogers told investors on a May 3 earnings call that “anticipation of more stringent environmental rules has long been part of our business plan.”

“Over the past 10 years, we have spent $5 billion retrofitting existing units with updated emissions controls,” Rogers said.

NextEra, the No. 1 U.S. wind-energy producer, generated about 90 percent of its electricity last year from “clean” fuels such as nuclear and natural gas, while Exelon sold off most of the company’s coal-fired plants to become the largest U.S. nuclear-power provider.

Constellation, which generates about 24 percent of its power from coal, spent almost $1 billion to install scrubber technology at a Maryland coal-fired power generator.

Digging Heels In

“Despite the fact that many coal-fired plants across the nation have installed the pollution-control equipment to reduce their mercury pollution, some utilities are still digging their heels in the fight to block or delay the proposed EPA rules,” Dan Weiss, director of climate strategy at the Washington-based Center for American Progress, a policy group that advises Democrats, said in a June 21 report.

EPA Deputy Administrator Bob Perciasepe said delaying the air-toxics rules doesn’t make sense.

“It is absolutely cost-effective and economical for companies to retrofit coal-fired power plants with the technology to meet this rule, and many have and many more will,” he said.

The EPA, under court order to act after former President George W. Bush’s planned mercury standard was declared unlawful, has said the law gives companies as many as four years to comply and estimates it would cost companies $10.9 billion.

Among Most Expensive

The Electric Reliability Coordinating Council, a Washington-based coalition of companies such as Atlanta-based Southern Co., has said the proposed rule is one of the most expensive in EPA history, and it may cost industry $100 billion to comply.

Southern’s CEO and Chairman Thomas Fanning told lawmakers on April 15 that the EPA’s timeline for regulation “can’t be done” and that the rule may reduce power reliability and increase electricity bills. Fanning said the rule is among pending EPA regulations that would cost the power industry as much as $300 billion during the next five years.

The EPA estimates the rule would increase electricity rates an average of 3.7 percent in 2015, an amount that Perciasepe said is in line with normal price fluctuations. Costs to industry and electricity users also will be offset by as much as $140 billion a year in health and economic benefits, according to the EPA.

Comment Period Extended

The EPA has said it has no plans to postpone issuing a final air toxics rule in November. The agency did extend the period for public comments on the proposal from 60 to 90 days after 27 House Democrats led by Representative John Dingell of Michigan asked for more time.

The EPA’s response to that demand may not auger well for the rule, according to Frank O’Donnell, who supports the pollution limits.

“It will undoubtedly increase pressure on EPA to delay the final standards, perhaps into election year,” O’Donnell, president of the Washington-based environmental group Clean Air Watch, said in an interview. “That would be very bad.”

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